Integrity at risk

The head of the U.N.'s oil-for-food program faces disciplinary action for allegedly accepting bribes from Saddam Hussein's regime.

By Suzanne Goldenberg - Ewen MacAskill

Published February 4, 2005 3:45PM (EST)

The United Nations suffered grave damage to its international reputation Thursday after it emerged that the official who headed the oil-for-food program for Iraq sought and obtained bribes from Saddam Hussein's regime. In a highly critical report, Benon Sevan was rebuked for actions that were "ethically improper and seriously undermined the integrity of the U.N."

"This is a painful episode for everyone in the U.N.," said the head of the investigation, former U.S. Federal Reserve chief Paul Volcker. He went on to accuse Sevan of offering to use his influence at the U.N. in return for the granting of vouchers to purchase Iraqi oil at favorable prices on behalf of a small Panamanian-registered firm. "Mr. Sevan created a grave and continuing conflict of interest," he said.

Sevan, a Cypriot who has spent 40 years as a career diplomat at the U.N., has denied wrongdoing. However, U.N. Secretary General Kofi Annan issued a statement later Thursday saying the U.N. would take disciplinary action against Sevan and Joseph Stephanides, the former chief of the U.N. sanctions branch, who was also criticized in the report. "Should any findings of the inquiry give rise to criminal charges, the U.N. will cooperate with national law enforcement authorities pursuing those charges, and in the interests of justice I will waive the diplomatic immunity of the staff member concerned," Annan said.

The oil-for-food scam allegedly saw Saddam exploit loopholes in the system, offering lucrative oil allocations or vouchers that could be sold on for profit in an attempt to bribe leaders around the world. According to the investigative report, between 1998 and 2001 Sevan sought vouchers for several million barrels of Iraqi oil on behalf of a small company called African Middle East Petroleum. In return, he was expected to make a case for Iraq receiving cash to upgrade its crumbling oil facilities, which he and several U.N. Security Council members did. The Panamanian-registered firm was believed to have made a $1.5 million profit on the vouchers.

"The most distinct finding is the accumulation of evidence that [Sevan] did in fact solicit oil allocations for a small trading company," Volcker said. "The Iraqis ... certainly thought they were buying influence." In addition, Volcker cited financial records which show that Sevan received $160,000 in cash payments from 1999 to 2003.

Although the allegations against Sevan were the focal point of the report, Volcker said the inquiry did not find systematic misuse of funds. However, it also found that three U.N. contractors for the program were selected without going through a competitive bidding process.

The White House and Republican congressmen are exploiting the oil-for-food row to undermine Annan, who opposed the U.S.-led war in Iraq. Earlier Thursday, a U.N. official described Sevan as "a good man being made a scapegoat."

Volcker is planning to produce another interim report before the summer looking into Cotecna, a company that benefited from the oil-for-food program and employed Annan's son, Kojo. He said work on that was well along. The final report is due in June.

Annan stressed Thursday that the U.N. is already taking action to improve the organization's procedures. At the height of the oil-for-food program, set up in 1996 to alleviate the impact of sanctions on ordinary Iraqis, the roads to Jordan and other neighbors of Iraq were full of tankers carrying illicit oil. Although Annan's secretariat ran the program, ultimate responsibility rested with the Security Council, which included the United States.

Suzanne Goldenberg

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